Drexel Still Pays Millions In Salaries

By KURT EICHENWALD

Published: December 24, 1990

Salaries continue to collapse on Wall Street, but at Drexel Burnham Lambert Inc., the former powerhouse that filed for bankruptcy protection earlier this year, some people are still receiving more than $1 million a year.

The firm, which declared bankruptcy on May 29, now has a skeletal work force of 292. Of those, 29 executives are each receiving more than $250,000 a year, with two traders each receiving $1.45 million a year, according to internal documents obtained by The New York Times.

The documents detail Drexel's finances through October. People involved in the bankruptcy proceedings said there has not been substantial change since then.

The salaries for the 29 senior executives and traders were set early in the bankruptcy proceeding. $35 Million in Payments

The total amount being paid to Drexel's 73 officers, which includes everyone from the level of a vice president to the chief executive, will be $21.1 million for 1990, according to the Drexel document. The amount paid to the rest of the staff will be $14.05 million.

"We think that the amounts of money that are being spent to continue the Drexel operation, which would include but not be limited to the executive salaries, are unnecessarily depleting the estate," said David Boies, a partner with Cravath, Swaine & Moore, the New York law firm that is representing the Federal Deposit Insurance Corporation and the Resolution Trust Corporation in a complaint against Drexel. "The assets ought to be preserved and distributed to the taxpayers represented by the F.D.I.C. with as little depletion as possible."

The payments have been reviewed by the Federal bankruptcy judge overseeing the case, Frank Conrad, as well as by executives on various creditor committees and the equity committee, which were established as a standard part of the bankruptcy proceeding.

The payments led representatives of some parties in the bankruptcy case, as well as some former Drexel employees, to contend that assets in the firm were being wasted. As part of the bankruptcy proceedings, Drexel recently agreed to have its compensation system reviewed by an outside consultant.

Drexel executives said they were in a difficult position when the firm filed for bankruptcy protection from its creditors. If the firm paid small salaries, it would be unable to retain a number of its most talented professionals, they argued. If they lost those executives, the firm would have greater difficulty selling some of its most illiquid assets. 'Institutional Memory'

And Drexel needed these professionals as an "institutional memory" to help it argue its case against the 9,000 civil claims filed against it, its executives say.

"In order to keep those people, you had to pay them a competitive rate," one executive with the firm said.

The payments are not scaled according to title. John Sorte, who became Drexel's chief executive earlier this year, is being paid an annual rate of $750,000, according to the documents. Richard Wright, the chief financial officer, is paid $650,000 a year, the documents show.

Frederick H. Joseph, the vice chairman of the firm who until recently was chief executive, is paid $450,000 a year, the documents show.

And as in Drexel's old days, some investment bankers and traders are paid more than their bosses. Robert Beyer and Mark Attanasio, both managing directors in capital markets, each receive $1.45 million a year, the documents show.

Warren Trepp, who was the head of the "junk bond" trading desk at Drexel, is paid $750,000. Question of Viability

Some lawyers have criticized Drexel's effort to reorganize as impossible, saying that executives with the firm should accept that it is no longer a viable business.

"At this point, it is clear that there is no realistic chance that Drexel is going to be reorganized," Mr. Boies said.

The debate about the firm's payments to its executives is coupled with concerns about payments to lawyers and other professionals assisting in the bankruptcy. Drexel has to pay for its own lawyers, as well as for those on the various committees. The firm disclosed in bankruptcy court recently that those costs for June through August came to $19 million. Of that amount, $16.6 million was for fees, and the rest was for expenses.

"The real money comes in where we have meetings and everybody sends one or two lawyers," one Drexel executive said.

At the recent presentencing hearing of Michael R. Milken, the former head of Drexel's high-yield "junk bond" division, a large number of bankruptcy lawyers attended each session -- with each separately submitting bills for watching the proceedings.